CIBC ousts Goldman Sachs to lead Canadian M&A

CIBC led Canada’s investment banks in advising on Canadian mergers last year, ousting foreign firms such as Goldman Sachs Group Inc. and Morgan Stanley from the top-three spots for the first time in at least a dozen years.

Canadian Imperial Bank of Commerce’s investment bank worked on 38 deals valued at $36.1 billion, including advising Equinox Minerals Ltd. on its sale to Barrick Gold Corp., according to data compiled by Bloomberg. Bank of Montreal’s BMO Capital Markets was second, followed by Royal Bank of Canada’s RBC Capital Markets. JPMorgan Chase & Co. was fourth and Toronto-Dominion Bank was fifth.

Canadian companies were involved in 2,300 announced takeovers valued at $177.5 billion last year, down 11 percent from almost $200 billion in 2010, according to Bloomberg data. The figures are as of yesterday and subject to change as more deals are recorded.

“It was a reasonable year for M&A activity, but certainly below where we’ve seen in terms of a peak in the market,” Mike Boyd, CIBC’s head of mergers and acquisitions, said in an interview from Toronto. “I expect we’ll see a stronger year for M&A in 2012.”

Last year was the first time in at least a dozen years that Canadian banks blocked foreign firms from a top-three spot for advising on Canadian takeovers, Bloomberg data show. In 2010, New York-based Goldman Sachs ranked first, followed by Zurich-based UBS AG and London-based Barclays Plc, with BMO Capital Markets in fourth. Morgan Stanley, based in New York, ranked No. 1 in 2009.

Canada’s dominance may be in part due to an increase in mining deals last year, said Peter Buzzi, head of mergers in Canada with RBC Capital, a unit of Canada’s largest bank.

“U.S. firms are less active on the mining side on a relative basis to the Canadian firms because it’s never been a sector in the U.S. that’s been significant,” said Buzzi, 51, whose firm moved up from sixth spot in 2010. “That’s really one industry where the Canadian investment banks dominate globally.”

Andrea Rachman, a spokeswoman for Goldman Sachs, the fifth- biggest U.S. bank by assets, declined to comment. Pen Pendleton, a spokesman for Morgan Stanley, the sixth-largest U.S. bank, also declined to comment.

RBC advised Barrick on its $7.81 billion takeover of Equinox, Canada’s biggest mining deal in 2011 and the second- largest takeover involving a Canadian company last year. Other mining deals in 2011 included Cliffs Natural Resources Inc.’s $4.48 billion agreement to buy Montreal-based Consolidated Thompson Iron Mines Ltd., and Eldorado Gold Corp.’s agreement last month to buy European Goldfields Ltd. for about $2.54 billion.

CIBC, the top adviser in 2008, jumped to No. 1 from ninth in 2010, according to Bloomberg data. BMO Capital Markets, a unit of Canada’s fourth-biggest bank, cracked the top three for the first time in more than a decade.

“We achieved record M&A revenues in our business last year in Canada and in the United States,” William Butt, 49, head of global investment and corporate banking at BMO Capital, said in an interview in Toronto. “Our overall M&A revenues are the highest we’ve ever seen in our firm.”

Two of Canada’s three largest announced deals involved Canadian pension funds, with Canada Pension Plan Investment Board the country’s most acquisitive firm. Canada Pension, the country’s second-biggest retirement fund, was involved in 19 deals valued at $15.8 billion, including a bank-and-pension fund-led bid to buy Toronto Stock Exchange owner TMX Group Inc. and the sale of Skype Technologies SA to Microsoft Corp.

The $8.5 billion Skype sale in October was Canada’s largest deal, according to Bloomberg. Canada Pension, which more than tripled its $300 million Skype investment in two years, was among a group of Skype investors that included U.S. private equity firm Silver Lake Management LLC.

Canada’s third-largest deal was the $5.73 billion takeover of Kinetic Concepts Inc. by Apax Partners LLP, along with Canada Pension and Public Sector Pension Investment Board, which closed in November.

“We’re going to continue to see private equity funds and pension funds be more active, given the strength in the debt markets and the relatively lower cost of capital for them,” said Boyd of CIBC, a unit of Canada’s fifth-biggest bank.

The average disclosed deal size was $132 million and the average premium was 30 percent, according to Bloomberg data. Canadian companies were the top acquirers in their own country, representing $118.6 billion of the deals, followed by U.S. firms, which invested $51 billion in Canadian companies, the data show.

Mergers and acquisitions may pick up in 2012, with more deals and larger transactions because corporate balance sheets are in “good shape” and capital to fund takeovers is available at a low cost, Boyd said.

“The Canadian economy is still performing relatively well, despite the challenges in Europe and elsewhere,” Boyd said. “We’re continuing to see demand in interest for the resource sectors in Canada, both mining and oil and gas.”

This year will be “a strong year” though not a record for Canadian takeovers, Andre Hidi, head of global mergers and acquisitions for BMO Capital Markets, said in an interview.

“The sectors that have been busiest over the last couple of years are, quite frankly, likely to continue, and that’s mining and metals,” Hidi, 51, said. “There’s probably going to be more breadth across sectors including financial services, media, consumer, retail, industrial and power.”

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